Productization of Education

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FACULTY OF BUSINESS STUDIES DEPARTMENT OF MANAGEMENT

Dominika Bartlova, a111623 Productization of education

Master’s Thesis in Strategic Management

VAASA 2018

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LIST OF FIGURES AND TABLES

Figure 1. Process of defining the research question. ... 13 Figure 2. Data structure inspired by a model by Corley and Gioia (2012). ... 35 Figure 3. Research results; The interconnection between service productization and competitiveness of international programmes at Finnish universities... 52 Figure 4. Conceptual presentation of the research results. ... 57

Table 1. Service productization as described in Finnish literature, loose own translation. .. 18 Table 2. Productisation of services as conveyed in the literature (Harkonen et. al 2015). .. 19 Table 3. Approximate number of applicants before and after the legislation change. ... 38

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LIST OF ABBREVIATIONS

AMK Ammattikorkeakoulu

EU The European Union

EEA The European Economic Area i.e. “id est”, that is

€ Euro sign

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UNIVERSITY OF VAASA Faculty of business studies

Author: Dominika Bartlova

Topic of Thesis: Productization of education Name of supervisor: Rodrigo Rabetino

Degree: Master’s Degree in Business studies

Department: Department of Management

Major Subject: Strategic Management

Year of Entering the University: 2017 Year of Completing the Master’s Thesis: 2018

Pages: 70+3

ABSTRACT

In 2015, Finnish government has amended the law concerning higher education in Finland, seriously effecting international degree programmes and institutions organizing them. Since the fall term 2017, all students with citizenship based outside of the European Union countries or the European Economic Area are obliged to pay tuition fees for studying any higher education programme in Finland. This modification caused decline in number of foreign applicants and universities are forced to take actions in order to be able to mitigate the impact and consequences of the legislative change.

This study focuses on analyzing the current situation of international programmes at Finnish higher educational institutions and exploring possible ways of improving their competitiveness through service productization. Recently, service productization has been gaining increased attention since it has the potential to improve business results as well as competitiveness. By transforming solely intangible services into more product-like sets of deliverables, which are standardized enough to be repeatable and easily comprehendible by the customers, results can be improved while costs, time needed and afford spent decrease.

The theory describing productization of education is very limited. This study assumes existing connections between service productization and the success of international programmes. It proposes a unique approach of implementing extensive service productization which results in increased performance. By productizing, universities could regain the number of applicants back and even exceed it in the future.

To be able to confirm these assumptions and obtain necessary data, an in-depth single-case qualitative study was conducted. As a case company, Centria University of Applied Sciences was selected and four principals of its four international programmes were interviewed.

Semi-structured interviews were the chosen technique for data collection.

KEYWORDS: Productization, service productization, education, international programme, university, competitiveness.

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1. INTRODUCTION

1.1. Motivation for the study

Manufacturers have been striving for higher returns and searching for additional growth opportunities by shifting their focus from creating products to offering customer solutions (Matthyssens & Vandenbempt 2008; Sawhney 2006), through a process called servitization (Vandermerwe & Rada 1988). Conversely, service-oriented businesses have tendencies to search for more product-like defined sets of deliverables, which are standardized enough to be repeatable and comprehendible (Harkonen et al. 2015). This shift, typically described as productization, can be challenging for service companies and their systems, although if understood and applied appropriately, it can be highly beneficial. Software, services and technologies, as well as companies themselves, can benefit from an increased clarity and uniformity which productization brings (Harkonen et al. 2015).

The term “service productization” has been referred to for the last 20 years and recently there has been an increasing number of articles discussing it (Harkonen et al. 2015). Previous studies have discussed productization from many different angles, for example Harkonen, Tolonen and Haapasalo (2017) have tried to systematize the service productization and define the term “offering”; or Lehtonen, Järvi, & Tuominen (2015) have focused on reflexivity in the productization of services. From a field of education, Aapaoja, Kujala and Pesonen (2012) discuss the productization of services in the context of university-industry co- operation. However, none of the existing studies analyzes how productization of services can be used to enhance university performance and competitiveness.

The lack of research concerning the productization of education or educational services represents a potential research gap. Especially, this topic could be interesting and potentially beneficial for Finnish higher education institutions, since they went through a major legislative change in 2015. The tuition fees, for both international Bachelor´s and Master´s

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degree programmes, were introduced and made compulsory for Finnish universities to adopt (The Ministry of Education and Culture 2015). The introduction of fees became a barrier for non-European residents to study in Finland which caused a serious decline in number of applicants, therefore problems for many universities and their international programmes (Kuronen & Mansikkamäki 2017).

This thesis aims to fill in the literature and research gap concerning the productization in the field of education and offers answer to the following research question: How can service productization enhance competitiveness of international programmes at Finnish universities?

The thesis analyzes appropriate literature and reviews existing research of productization and productization in the field of education. Combined with a case study, it describes and suggests how could international programmes taught in English at Finnish universities utilize productization and profit from it.

1.2. Justification of the study

There has been a change of the legislation in Finland and since the fall term 2017 all students with citizenships based outside of the European Union countries or the European Economic Area must pay a tuition fee for studying any higher education in Finland. The law has been amended in 2015, stating that from the beginning of 2016 Finnish universities could collect tuition fees, and are obliged to do so from the fall term 2017. (The Ministry of Education and Culture 2015.)

Due to this change, many Finnish universities find themselves struggling. On one hand universities see this change as an advantage which is going to bring additional revenues, although on the other hand, the amount of non-EU/EEA applicants (the main segment among international students for most Finnish universities) has decreased after the implementation.

The decrease of the applicants causes many universities serious trouble and jeopardize their internalization or even existence. (Kuronen & Mansikkamäki 2017.)

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As the education cannot be marketed anymore as free of charge, which was one of the most attractive features and the main source of competitive advantage, Finnish universities need to find other ways of differentiating and creating additional value to be able to attract international students. This study focuses on finding new innovative ways of improving the competitiveness of international programmes taught in English via productization of services.

1.3. Research gap

The literature discussing the productization of services is mostly published in managerial magazines and discussed at seminars among practitioners, yet it is not widely discussed in the academic literature. Based on the review on productization, current journal articles referring to the productization of services are limited and are lacking depth and terminological unambiguity. For those reasons, there is an obvious need for more detailed future research. (Harkonen et al. 2015.) Concretely, only one previous study analyzes the productization within a university environment. In their work, Aapaoja et al. (2012) focus on the productization of university services, although the research question specifically aims to analyze how productization of services can be used to enhance university-industry co- operation. No further literature investigating the productization in connection to international education has not been found.

Due to the recent changes of the Finnish legislation, number of international degree students coming from outside the EU/EEA area has decreased (Kuronen & Mansikkamäki 2017) and there is a lack of academic literature discussing how to palliate this problem. Managerial recommendations or future marketing strategies and techniques, which could guide universities in absence of applicants in this specific situation, are completely missing.

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This thesis tries to find ways of using service productization to mitigate the impact and consequences of the legislative change to international study programmes. The focus is given on discovering connections between service productization and programmes´ prosperity. By using proposed centrally organized and guided service productization and overall standardization, like for example excessive detailed planning stage, where product-like sets of deliverables are developed, implementation stage, marketing, feedback collection, etc., this thesis assumes improvements of the competitiveness and increase number of applicants.

The present thesis aims to fill in an apparent research gap, considering productization of education and its impact on higher-education international programmes in Finland. It aims at illuminating the interdependencies between the service productization and improvement of programme positioning and competitiveness. It also tries to discover ways and practices by which international programmes could be transformed into more product-like packages which would be easier for the organization to create, upscale, package and market; and which would be at the same time easier for the potential applicants to recognize, identify, select and apply.

1.4. Objectives of the study

The main objective of the study is discovering, how could service productization help universities to become more competitive and attract more applicants since there has been a decline after the legislative change which came into practice in 2017. The purpose is not only to confirm the connections exist, but also to propose valuable means of using them to benefit the organization.

To be able to do so, single case qualitative study was conducted, when suitable individuals from higher education institution in Finland were interviewed. Major goals of the semi-structured research interviews were to determine in which situation international programmes are after the tuition fees were introduced, if the programmes are somewhere utilizing service productization and its impacts, and finally if further service productization could enhance future competitiveness of the programme.

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Based on above-mentioned research objectives, following research question was defined:

How can service productization enhance competitiveness of international programmes at Finnish universities?

To be able to answer the main research question, one more supporting question was formulated:

How is service productization of international programmes used now by Finnish universities?

1.5. Delimitation of the study

The main topic of interest behind this thesis is productization of services. Concretely, this study focuses on one segment of service productization – the productization of education.

Thus, the thesis tries to understand whether productization of educational services could enhance the performance of higher educational institutions and hence improve their competitive positioning and, in turn, their competitiveness.

Since educational systems vary from country to country, this study focuses only on education in Finland. As mentioned earlier, there has been a change of education legislative concerning tuition fees at Finnish universities. Many universities are facing existential problems. Due to the existing need of prompt and rapid improvement, this study focuses specifically on international Bachelor´s and Master´s degree programmes, which are seriously influenced by the recent change of the regulations. This thesis analyzes the current situation and tries to offer innovative solutions via further productization, aiming at restoring the high and sufficient number of applicants like those that universities used to have before the tuition fees came into practice.

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The following table presents the process of narrowing down the topic and specifying the research question.

1.6. Thesis structure

The thesis consists of two parts, which can be described as follows: (1) the theoretical background, and (2) the empirical case study. The first theoretical section sets a foundation for the study by presenting the theoretical underpinnings and forming the assumptions about interdependence between productization of education and an increased competitiveness. It also explains the major concepts related to the study which help the readers to follow the text.

Based on the collected empirical data, the second part presents the findings about the use of service productization in practice. It studies the connections between the productization of education and university´s competitiveness. This part also examines, whether the Figure 1. Process of defining the research question.

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assumptions were correct and whether the inputs from existing theories can be applied to the case of higher education. It also provides productization ideas for further competitiveness enhancement.

Finally, the conclusion part is based on the comparison of the results to the theory. The last section consists of key findings, theoretical and managerial implications, as well as ideas for future research and the limitations of the present study.

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2. LITERATURE REVIEW

Literature review is an approach of identifying, assessing and interpreting relevant texts apropos to a desired research question, topic or phenomena (Kitchenham 2014). This chapter introduces the conceptual basis of productization while contextualizing the topic through a discussion on the application to the higher-education context, two necessary steps to construct and interpret the empirical part of this work.

2.1. Productization

The term “productization” derives from the term “product” which plays a central role in this process. Product can be of a tangible or an intangible nature, or sometimes even a mixture of both. For example, services which are naturally intangible and abstract, can be understood as products, satisfying and fulfilling customer needs without any obvious exchanges of tangible products. Also, software and other computer programs, which are of an intangible origin, can be considered as product. (Harkonen et. al 2015.) Product is simply a mixture or combination of assets, both tangible and intangible, which establish a value proposition which can be offered to customers to fulfill their needs.

Productization can be explained as a process of combining these tangibles and intangible elements into a product (Harkonen et. al 2015). According to Pyron et al. (1998):

“Productization simply covers all activities required before a product is ready commercially.” Similarly, productization can be described as a transformation of research and knowledge into products (Floricel & Miller 2003). For the purposes of this work, productization can be understood as a complex process of identifying and analyzing customer need, defining and merging appropriate tangible and/or intangible assets, into intelligible, standardized and repeatable product-like sets of deliverables which can be commercially marketed.

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Harkonen et. al (2015) divide productization into four categories; productization of products, services, software and technology. Productization of products is slightly complicated to describe. The set of deliverables here consists of the tangible product and intangible supporting activities, which are necessary in research and development, engineering or manufacturing. The productization process concerns mainly the intangible part needed for developing marketable offering. Ma and Fuh (2008) mention product productization as a part of development part, alongside with designing, process planning, manufacturing, assembly, selling, maintenance, recycle and destroy. Productization of products can be simplified as a process of standardization which enables wider utilization (Ruohonen et al. 2006).

Software productization recently gains its popularity due to the increased world-wide digitalization, although the literature discussing this field appears to be very limited. Electro- mechanical products are more and more substituted by the software-based ones. (Harkonen et. al 2015.) When talking about a software product, Fricker (2012) defines it as a set of deliverables containing the computer program itself, but also associated procedures, connected documentation and the delivery techniques. The process of productization of software is to some extent similar to service productization due to the intangibility and abstraction of the software industry. Alajoutsijärvi et. al (2000) sees it as a shift from completely intangible entities towards tangible standardized products. It can be described as a set of processes seeking for ways of how to interface computer programs, data and procedures through the process of standardization into the sets of deliverables which are easy to be commercialized and marketed. Productization also brings increased level of comprehensibility, repeatability, tangibility and scalability.

Productization of technology comprises processes at the frontiers of technological knowledge (Harkonen et. al 2015). It is described as a link between the development and technological innovations (Mathur 2007) or a stage between the development period and commercialization and market launch (Xiuli 2011; Sahlman & Haapasalo 2011). For a technology to be able to fill a specific market need, it needs to be transformed into a product.

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The transformation is important due to the intangibility of technology. It allows customers to appreciate the innovation the technology brings. Although the productization is not only transforming the technology into a product. It is about the shift from engineering-oriented to commercial-oriented thinking and the process that allow, support and enhance that.

Finally, productization of services can be described as a bundle of activities which bring more tangibility, comprehensibility, scalability, repeatability, uniformity, etc. to ordinarily solely intangible services (Harkonen et. al 2015). This thesis specifically focuses on this type of productization and therefore this field is given a separate chapter which follows.

2.1.1. Service productization definitions

Productization of services is different to productization of products. As already mentioned earlier, products are of a tangible origin and by selling them, an actual exchange takes place.

On contrary, when offering services, no tangible exchange happens, and the trade does not result into ownership. (Kotler 1997.) So far, it is not usual to perceive services as products and selling of services is not seen the same way as selling of products (Sipilä 1996).

Although, if services tend to be sold more efficiently, in a bigger scale, to a wider customer- base, they should be transformed into more product-like.

Productized services are just like products; packaged, easy to be recognized or identified, selected and purchased. Productization of services comprises ways of implementing and utilizing features which are usually common for tangible products to abstract impalpable merchandise. By productizing a service, more leverage is added to the service company. If service productization is implemented well, it allows the company to earn more, with less work, yet providing customers with more and better value.

Because this work examines service productization in solely Finnish environment, following part provides definitions of the term “service productization” found in Finnish literature.

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Parantainen, who written and cooperated on many books and articles from the field of productization, starts one of his books by claiming that service productization does not have a single paradigm and the definitions vary from author to author. He defines it as a process of transforming the expertise, intangible knowledge, or know-how into a set of deliverables which is salable, marketable and easy to be delivered (Parantainen 2007). Jaakola et al.

(2009) define service productization as a way of arranging service development in a way so that goals like prosperity on international markets are achieved. According to Sipilä (1999) it comprehends actions like defining, planning, developing, describing and manufacturing the service, in order to be able to maximize customer profitability and meet company´s earnings targets. When the service product is ready to be sold further, it can be considered as successfully productized (Sipilä 1999). Importantly, productization should not be seen as only a process which focuses on defining service products. It should be perceived as a part of research and development plan, focusing on designing the entire service delivery into more controllable and predictable formula. (Lehtinen & Niinimäki 2005.)

Table 1. Service productization as described in Finnish literature, loose own translation.

Definition Author

“A process of transforming the expertise, intangible knowledge, or know-how into a set of deliverables which is salable, marketable and easy to be delivered.”

Parantainen (2017)

”A way of arranging service development in a way so that goals like prosperity on international markets are achieved.”

Jaakola et. al (2009)

”It comprehends actions like defining, planning, developing, describing and manufacturing the service, in order to be able to maximize customer profitability and meet company´s earnings targets.”

Sipilä (1996)

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”It should be perceived as a part of research and development plan, focusing on designing the entire service delivery into more controllable and predictable formula.”

Lehtinen & Niinimäki (2005)

From a world-wide literature, according to Bask et. al (2010) productization of services is a relatively new term which is gradually rising interest amongst professionals. Nagy (2013) describes it as a stage which foregoes sales where services are transformed through commodification and systematization into more product-like solutions. It focuses on obtaining advantages from efficiency, configurability, scalability and modularity (Morrison 2003).

Table 2. Productisation of services as conveyed in the literature (Harkonen et. al 2015).

Productisation in the category of services References To address various challenges, including

inefficient production of services and difficulties by customers and company employees perceiving the service offering

Valminen and Toivonen (2012), Jaakkola (2011), Ardley and Quinn (2014)

To make services more product-like, repeatable and tangible

Salmi et al. (2008), Bask et al. (2010a), Chattopadhyay (2012), Valminen and Toivonen (2012), Djellal et al. (2013), Stone (2010), Karmarkara and Apte (2007), Skalen and Hackley (2011), Morrison (2003), Nadim and Singh (2008), Rissanen et al. (2010), Mattila et al. (2013), Gupta (2011)

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Facilitates the development of customer understanding

Valminen and Toivonen (2012)

Packaging the service offering Leon and Davies (2008), Ukko et al. (2011), Bruce et al. (2008)

Linked to content and pricing of services Arrto et al. (2008), Chattopadhyay (2012) Developing well-defined service packages Lukka and Partanen (2014)

Making services tangible and providing more product-like services through systemization of their components

Nagy (2013)

Refers to heterogeneity - to visualise, model and scale the offering

Ritala et al. (2013)

Highlighted as a pre-sales activity Nysten-Haarala et al. (2010), Hanninen et al. (2013b,c)

Relates to modularity in services Rajahonka (2013) Relates to enhancing services Anupam et al. (2006)

Follows R&D Daim et. al (2013)

These definitions proved that service productization can be perceived and formulated differently. Although, what they have in common, they all describe productization process as comprehensive, aiming at transforming intangible services into more product-like form which brings increased value to the customers as well as more profits to the sellers.

2.1.2. Standardization

Service productization can be accomplished through standardization. Through standardization, services are converted into easily distinguishable deliverables with unique attributes which are easy to commoditize. By standardizing service processes, the service becomes more of a stable and consistent value, easier to be copied and easier to be predicted,

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especially in the field of production costs and production time. Standardization can result in increased level of compatibility, repeatably, scalability, comprehensibility, modularity, predictability but also safety and quality. Also, it decreases the risk caused by differentiation and divergence. All previously mentioned qualities result in lower production costs and more product-like service packaging, which is less-risky to market and sell. (Apunen &

Parantainen 2011.)

Despite the fact that service productization and standardization brings many advantages, Nagy (2013) also states some disadvantages. By converting the intangible service offering and connected knowledge into tangible standardized products, it is easier for business rivals to copy or steal them with less difficulties (Nagy 2013).

2.2. Productization of higher education

Higher education, or differently third-level education, tertiary education or post-secondary education, refers to an optional learning delivered by multiple different organizations such as universities, universities of applied sciences, colleges, academies, conservatories, etc.

When completing an education programme or research, participants are awarded by academic degrees from relevant academic field or discipline. (Clark 1986). Higher education systems, structures, requirements and rules differ significantly from country to country.

In this context, there is a lack of literature discussing productization of education. In the field of education, only one article by Aapaoja, Kujala and Pesonen (2012) discusses the productization of services in the context of university-industry co-operation. However, it neither considers the legislation change and its effects on higher educational institutions nor discusses the use of productization as a tool for enhancing programmes´ competitiveness and attracting students.

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Järvi and Toivonen (2012) claim that service companies can improve competitiveness and performance through productization, mainly by better service definition, systematization and concretization. Also, Sipilä (1999) believes that by more thorough defining, systematizing and concretizing the service offering can result in improved efficiency as well as profitability.

In addition to improved competitiveness, productization can enhance the amount of knowledge transferred and improves the work division (Sipilä 1999). Based on above mentioned theoretical findings, this thesis assumes that productization can enhance competitiveness of international programmes since international programme or the providing higher educational institution can be perceived as a service company.

Simultaneously, according to Kallio (2017) in 2017 the number of international applicants for higher educational programmes in Finland has decreased by 10% to 15% compared to the previous year. This decrease was caused by the introduction of tuition fees for all international students coming from countries outside of the European Union or the European Economic Area (The Ministry of Education and Culture 2015.) According to Kuronen and Mansikkamäki (2017) the decrease of applicants causes many universities serious trouble and jeopardize their internalization or even existence. This thesis suggests that this problem can be solved by implementing service productization, since in the previous part it introduces assumptions about productization and its positive effects on competitiveness.

Furthermore, Jaakola et. al (2009) introduces an approach by which productization can be implemented to service businesses in following stages: (1) evaluating customers´ needs and discovering the ways of satisfying them, (2) defining the service offering, structure and content, (3) determining the level of standardization, (4) concretizing the service package to the customer by creating package description and introductive brochures, (5) defining the pricing system, (6) collecting the feedback and measuring the service success, and (7) analyzing the feedback results and adjust accordingly future development. This study acknowledges this approach and modifies it to fit higher educational institutions´ purposes and their specific environment. Productization of education should be done carefully in

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several subsequent stages, where each of them is similarly important. The stages are:

planning, implementing, marketing and feedback collection.

The scarce existing literature seems to suggest that service productization may be connected to competitiveness of international programmes at higher educational institutions in Finland.

Service productization can enhance the competitiveness of service business, and this thesis assumes that this basic assumption can be applied at university environment. Further, the legislation change establishing compulsory tuition fees for some of the international students represents a major problem for many universities. Accordingly, this problem can be solved by implementing service productization in subsequent stages, which if applied correctly, can enhances the competitiveness. To be able to explore these assumptions, a research was conducted in form of in-depth single-case qualitative study consisted of four embedded cases.

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3. METHODOLOGY

Methodology is a set of techniques, methods, approaches and tools used for studying a field, activity or problem. In the following chapters the methodology of this study is presented.

Accordingly, the research strategy and the method are introduced, the selection process justified, and the data collection and data analysis processes described.

3.1. Research strategy and method

According to Buckley et al. (1976), research methodology can be defined as “… a strategy or architectural design by which the researched maps out an approach to problem-finding or problem-solving.” In other words, research methodology is a thorough strategy by which the research techniques are decided to help to solve research problem and to reach anticipated outcomes (Crotty 1998).

Research strategy has two possible distinct approaches: qualitative and quantitative. Based on the type and qualities of the research problem, one of these two is selected (Eriksson &

Kovalainen 2016). If the researcher intends to explore a new field or transform current knowledge into theory, qualitative research strategy is considered as highly convenient and so for recommended (Corbin & Strauss 2008). Based on the nature of this research and its aims, qualitative research was selected as the most appropriate research methodology.

The method by which the qualitative research was carried on is an in-depth single case study.

Case studies in general are meant to examine a specific problem within its own context. Yin (2013) recognizes two types of case studies; single and multiple. Single case study analysis is particularly suitable when analyzing a phenomenon which is hard to simply measure or quantify and which is irreducibly subjective (Yin 2013). Based on these facts, a single case study is the most suitable option for this thesis. Thus, a single case study, examining one of

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the higher educational institutions in Finland, although it consists of four embedded cases, each representing one of the international programmes the case organization organizes.

Embedded case studies still only concern one main unit, although the data are acquired from its subunits. For example, in organizational embedded case studies, the company itself represents the main unit while its departments are the subunits. Embedded case studies allow usage of different methods for each of its subunits. During the research, the subunits are being analyzed, however the aim is general comprehension of the examined organization in its real-life environment. (Scholz & Tietje 2002.) In case of this thesis, the main unit is the case organization – Centria University of Applied Sciences. However, the target of analysis are the subunits which represent four distinct international programmes which the university organizes.

The most common techniques of qualitative research methods are observation and interviewing, but there are many other tools, methods and approaches, which can offer desired in-depth comprehensive understanding of examined problem (Creswell 2007). To acquire the primary data, interviews were conducted by using a semi-structured protocol.

Each interview took about an hour and half and was recorded to be later transferred into transcripts to ease the process of further processing.

3.2. The context: A Description of higher education in Finland

There are two different types of higher education institutions in Finland: 1) universities and 2) universities of applied sciences. The university offers theory-based classes and focuses on scientific research. It requires a high level of independency and supports individualism. If internship is performed, then it is more of a scientific nature, observing and researching a particular company, not performing day-to-day operations. On the other hand, university of applied sciences tries to combine both – theory with practical skills. It offers challenging classes focusing on practical skills which can be used in real work life. Often, courses consist

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of lectures with field experts and company representatives, field visits and excursions, and sometimes even work-placements. These work-placements are more hands-on, and students are supported to participate in all daily routines. Altogether, Finland has 14 Universities and 24 Universities of Applied Sciences. (Web.centria.com 2018.)

In both, universities and universities of applied sciences, Bachelor´s degree programmes and Master´s degree programmes are offered. Moreover, universities are authorized to offer postgraduate licentiates and doctoral degrees. No matter of which institution the chosen programme is from, the graduation diploma has the same legal value. Although the admission criteria and programme´s requirements and content vary. (Studyinfo.fi 2018.)

From the international point of view, Bachelor’s degree programmes in English are mostly organized by universities of applied sciences while Master´s degree programmes taught in English are usually offered by universities. There are approximately 100 Bachelor´s programmes and 20 Master´s programmes taught in English which are organized by universities of applied sciences and around 200 Master´s programmes and 23 Doctoral programmes taught in English are provided by universities. (Studyinfo.fi 2018.)

Proven by the fact that Finland has over 400 English-speaking higher education programmes, international study environment is extremely welcoming and perspective for all foreign applicants. Studying in Finland has many advantages. The country itself is very internationally-minded and it´s higher education is of a high quality and of an excellent reputation. Finnish higher education institutions are well-funded and supported by the state so they can offer high-tech laboratories, well-equipped school facilities, libraries, sport premises, etc. (Bachelorsportal.com 2018.)

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3.2.1. Legislative change

Introduction of tuition fees in Finland has been a center of discussions for last two decades.

In 2004, the government published a globalization report which discussed the possibility of tuition fees implementation in Finland. On minister of education´s command, an investigative group was formed to examine these possibilities. In 2015, the research group proposed a scheme stating that students from non-EU/EEA countries would be obliged to pay tuition fees, differing from 3,500 € to 12,000 € per academic year. Nevertheless, at that point the proposal was not unanimously approved by the parliament and due to that the fees did not come into practice. (Kivistö 2009)

As mentioned in the introductory part of this work, finally in 2015, the law concerning Finnish universities and universities of applied sciences was modified. The new legislation concerning foreign language degree programmes and tuition fees claims that since 2016 higher education organizations were able to collect fees from students originated from countries outside EU/EEA area. Then from the fall semester 2017, these institutions were obligated to do so (The Ministry of Education and Culture 2015).

As described in one of the acts, each organization can decide the amount of the tuition fee on its own, although the minimal amount per academic year is 1, 500 €. The collection rules and payment options can also be decided by the organization itself. To support the paying students, it is compulsory to have a scholarship system. (The Ministry of Education and Culture 2015.)

3.2.2. Current challenges

Due to the change described in the previous chapter, many Finnish universities are struggling.

On one hand universities could benefit from this change since it might bring additional revenues. Although, it is not proven yet that tuition fees will necessarily improve the

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economy or enlarge the funding base. On the other hand, the amount of non-EU/EEA applicants, which before the fall 2017 used to be the majority of applicants for most of Finnish universities, has suffered a decline. The decrease of applicants causes many universities serious trouble and jeopardize their internalization or even existence. (Kuronen

& Mansikkamäki 2017.)

Before the tuition fees were made compulsory, one of the main competitive advantages and aspects of foreign students’ attraction was the fact that the education was free of charge.

Since after the change that fact had to change, and nowadays higher education institutions must develop differentiation points and focus on marketing them to improve competitiveness and attract applicants again.

3.3. Case Selection Process

For the explorative purposes of this research a case institution was needed. The case selection criteria were as follow:

1) The case institution needs to be an educational institution that offers higher education in English for international students

2) It is located in Finland

3) It has an innovative approach to education and supports internalization

4) It has taken extra actions or implemented a responsive strategy when the legislation change came into practice.

Based on these requirements, Centria Ammattikorkeakoulu, shortly Centria AMK, was selected as the case institution. It is a higher education institution, located in Finland, with modern dynamic approach, whose core values are safety, responsibly, transparency, entrepreneurship, internalization and innovation, and importantly has applied a unique strategy while approaching the tuition fee challenge.

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Centria Ammattikorkeakoulu is a University of Applied Sciences established in 1991. It is centered in Kokkola in Talonpojankatu campus, but also operates in two other campuses in Ylivieska and Pietarsaari, all in Central Ostrobothnia region. The institution currently offers five various international programmes (see Table 3) being taught in two different campuses - Talonpojankatu in Kokkola and Allegro in Pietarsaari. Each programme has a different agenda and its own principal lecturer. Principal lecturer is the head of the programme who is responsible for managing the programme as well as the programme´s teachers. He or she makes all-important decisions considering the programme´s agenda, content and development, ensures effective planning, monitors smooth execution of the plan, manages programme´s teachers, communicates with supervisors, and teaches.

For this particular research, four out of five principal lecturers were interviewed. The principal lecturer who is responsible for the Bachelor´s programme in Environmental Chemistry and Technology did not participate in the research. This principal lecturer was contacted via e-mail multiple times but has not ever responded, probably due to lack of time, since principal lecturers are overloaded by the amount of tasks they are responsible for and that they have to execute or oversee. Since one of the programmes did not contribute to this study, some data is missing. The missing data represent a restrain, although thanks to the nature of this research, not a major obstacle.

Table 3. International Bachelor´s Programmes at Centria Ammattikorkeakoulu.

Degree Degree Programme Principal Lecturer

Business Management, Enterprise Resource Planning (ERP)

Bachelor of Business Administration

Janne Peltoniemi

International Business Bachelor of Business Administration

Sara Åhman

Environmental Chemistry and Technology

Bachelor of Engineering Did not participate in the research

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Information Technology Bachelor of Engineering Sakari Männistö

Nursing Bachelor of Health Care Maria Björkmark

Centria AMK is a small university and due to its size, it has to focus on its strategy, core abilities and differentiation points to be able to survive in today´s competitive world. The approach to education is very pro-active, modern and dynamic using teaching techniques like simulations, problem-based learning, group projects, design thinking, and similar using hi- tech facilities and equipment. It´s core values are safety, responsibly, transparency, entrepreneurship, internalization and innovation.

As an example of its matureness and high level of advancement in strategic and innovation thinking, Centria developed an extraordinary pre-intake strategy applied in 2017 to avoid any drastic consequences of the introduction of tuition fees. This pre-intake strategy was applied by only two universities in Finland; Centria University of Applied Sciences and Lahti University of Applied Sciences. As the term “pre-intake” suggests, the strategy was based on programmes starting uncommonly in spring instead of fall, to avoid the tuitions at the last moment. This deviation allowed the programmes to skip the first commissioned intake period and instead obtain valuable information by observing other institutions battling the legislation change. It also ensured precious time for resolving what the next strategy and innovation steps are going to be. Based on these facts, Centria was evaluated as highly suitable alternative and was selected to be the case company for this research.

3.3.1. Centria University of Applied Sciences

This qualitative study investigates one institution and analyzes four interviews. The studied institution Centria Ammattikorkeakoulu is relatively young University of Applied Sciences, established in 1991 in Kokkola, Finland. Currently it is centered in Talonpojankatu campus in Kokkkola, but also has two other campuses in neighboring towns Pietarsaari and Ylivieska.

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All three towns are located in Western Finland, relatively near-by each other. Kokkola is by far the biggest, compounding over 47,000 inhabitants, being the twenty-second biggest town in Finland (Kokkola.fi 2018). It is also the capital of Central Ostrobothnia region (Kokkola.fi 2018). The campus in this city lies on Talonpojankatu and accommodates most of the students. Pietarsaari and Ylivieska are much smaller. Pietarsaari, as well as Kokkola, is a seaside town. It is significantly bilingual, consisting of around 20,000 citizens (Britannica 2018). The campus is there is called Allegro. And finally, the only inner-land town Ylivieska, which belongs to Northern Ostrobothnia, has over 15,000 inhabitants. Local campus currently does not offer any international options for foreign students (Ylivieska.fi 2018).

Centria University of Applied Sciences is owned by a limited liability company called Centria University of Applied Sciences Ltd. The main stakeholder City of Kokkola owns 27% share. Furthermore, the stakeholders are the City of Ylivieska, the Central Ostrobothnian Entrepreneurs Association, the Education Federation of the Jokilaakso Region, the Ostrobothnian Chamber of Commerce, the Federation of Education in Central Ostrobothnia, the Central Ostrobothnia Conservatory Association and the Raudaskylä Christian College Association. The CEO of this limited liability company is the current rector of the university Kari Ristimäki. (Web.centria.com 2018.)

The university overall consists of around 2900 students. The institution organizes Bachelor´s Programmes both in Finnish and English, and one Master´s Degree Programme (Master of Business Administration, MBA). Although, for the purposes of this thesis, only the bachelor’s degrees are going to be further discussed. In Kokkola itself, students can study in English four different programmes and are able to gain bachelor’s degrees in three different fields; Business Administration, Engineering and Health Care. In Pietarsaari in the Allegro campus, international students can study International Business Programme to become Bachelor of Business Administration. As previously mentioned, these days Ylivieska does not facilitate any international programmes.

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From the international perspective, before the legislative change in 2015, resp. 2017, the school was performing very well. Yearly, it had over 200 newcomers representing various countries from all around the world. The high-standard, modern, interactive and free-of- charge higher education was a good seller.

Centria promotes to be modern, dynamic and multidisciplinary schools which core values are safety, responsibly, transparency, entrepreneurship, internalization and innovation (Web.centria.com 2018). Especially last two of these aspects are very interesting and important for this study. Centria AMK is a very business-oriented school which concentrates on being multicultural and international. Nowadays business environment demands connections with outside world and Centria tries to work on it for itself as well as for its students. It focuses on internalization at campuses, promotes international programmes, supports mobility programmes, and builds wide networks based on strong relationships with partner universities, institutions and companies all around the world. The partner foreign institutions share similar goals and/or approaches and bring benefits to Centria´s students in form of study exchanges, international projects or study-related work placements and internships. Also, to enhance the internalization, Centria is trying to offer more and more English-taught degree programmes. In 2010 it offered three programmes in English while now it organizes five (Web.centria.com 2018).

According to data gained during the interviews, most of the students before the change were from Africa and Asia, and in a lesser extent from Europe, which of most, from the countries of the European Union. Barely none, or sporadically some, from other continents.

Introducing the fees caused major problems for the case organization, since most of its international students were about to start paying for the receiving education. Since it is a serious but very recent change, the university is still trying to find ways of dealing and overcoming the obstacle. Though, some issues are obvious already; the number of international applicants has decreased, and international base is starting to change.

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3.4. Data collection

Interviews are one of the most common ways of conducting qualitative research and can be described as a discussion with a purpose between two people (Saunders et al. 2012).

Interviews with a scientific purpose and research interviews very rarely lack structure; most of them are either semi-structured, highly structured or in-depth interviews (Bryman &

Burgess 1996). For the purposes of this thesis, semi-structured interviews were applied; since highly structured and in-depth interviews are usually used when conducting a long-term study where respondents are left to express their own ways, with very little or no interference from the interviewer (Corbin & Morse 2003).

For a semi-structured interview, questions are prepared beforehand. During the actual interview, the interviewer leads the discussion and asks prepared questions. Although, the questionnaire does not limit the conversation and interviewer can ask additional questions which are related and relevant to the research topic and can support or enhance the result of the discussion. These interviews are usually informal. The interviewer is advised to pay attention that all planned questions were answered, and the aim of the interview fulfilled.

(Eriksson & Kovalainen 2008.)

To obtain the data needed, four programme principals were interviewed. Aim was to interview head of each international programme Centria organizes, which would mean five, however one of the principals refused to participate as mentioned and explained earlier.

Interviews were carried out in September 2018 in Kokkola and Pietarsaari at Centria´s premises. Each interview took slightly over an hour. Three interviews were recorded and later on converted into transcripts. One of the interviewees refused to be recorded and this requirement had to be respected. The reason why one of the interviewees refused to be recorded is because he or she feels restrained and nervous when being recorded and it prevents him or her from being able to fully express ideas, thoughts and opinions. However, the important and most essential information were noted down during this interview and used, later on, in the analysis with other transcripts.

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The interviewees agreed to have their names published in the introduction (see Table 3.), although they did not wish to be mentioned any further with connections to specific information or statements given. For that reason, the names, in the findings interpreting section, are going to remain confidential and data is not going to talk specifically about each of the programmes. Due to this fact, the results might slightly seem to generalize, however the connections between service productization and education are illustrated well, and their effects remained uninfluenced.

3.5. Data analysis

When conducting a research, there are multiple ways and techniques of analyzing the data.

For qualitative research case studies, the typical options are: discourse analysis, narrative analysis, conversation analysis and content analysis (Eriksson & Kovalainen 2016). For this work, the selected approach for analyzing the data was through the content analysis, where the researcher examines the data by coding the transcript materials searching for similarities, patterns and frequencies (Eriksson & Kovalainen 2016). Based on the literal transcription of the interview-recordings, the content of the interviews was systematically coded and divided into first level concepts. Emerged concepts were further analyzed and grouped into second level themes. When concepts and themes were defined, it was possible to start searching for possibilities of refining second level themes into second level aggregate dimensions.

As Gioia et al. (2012) state, after achieving the distinction of first level concepts, second level themes and aggregate dimensions, the research approach has its stepping stone – a data structure. The data structure is a valuable visual framework for portraying and explaining the audience the way of transforming the raw initial data into terms and themes and illustrating the rigor of the research (Tracy 2010). Obtained terms, themes and aggregate dimensions were further analyzed in couple of rounds, comparing and combining with relevant literature,

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searching for theoretical precedents and possibly for new concepts. To ensure transparency, the data structure of this work is attached below.

Figure 2. Data structure inspired by a model by Corley and Gioia (2012).

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4. FINDINGS

This section presents the results of this research. The results are divided into sub-sections based on the topical blocks that were discussed during the interviews. Accordingly, the main topics are – the impact of the change in the legislation, the implemented innovations, the use of productization, and the current development plans and further innovation ideas.

4.1. Impact of the legislation change

The first set of questions focuses on the situation before, during, and after the tuition fees were introduced in 2017. To overcome severe consequences of the introduction of the tuition fees, each programme developed a unique strategy.

Two of the programmes organized the so-called “pre-intake”, where an ordinary programme started uncommonly in spring instead of fall, to avoid at the last moment the tuitions. Thus, the programmes started gradually in fall 2015, fall 2016, spring 2017, fall 2018. This innovative strategy allowed these programmes to skip the first commissioned intake period and instead obtain valuable information by observing other institutions dealing with it.

Moreover, the pre-intake brought valuable time which was used for resolving what the next strategy and innovations are going to be. One of the interviewees concluded the pre-intake strategy as follows:

“…by this move, we wanted to obtain a competitive advantage and purchase time.”

(Interviewee A)

Third programme decided to skip the intake in the year 2017 completely, but instead accepted more students and created bigger cohorts in 2015 and 2016. During the skipped year 2017, the programme management took the time to rethink the strategy and plan the next moves.

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Due to its small size, the last programme decided to skip even the year of 2018 and fully focus on developing the programme which will start in the fall of 2019.

It appeared that being given the time and space to talk about the change and how was the programme preparing for it and what occurred afterwards, brought very many extra important facts. For example, interviewees independently mentioned that they tried to use their differentiation points, adjusted their strategies and implemented important innovations, without even reaching the question Q3 that specifically focuses on differentiation.

“When the change was approaching, we understood that we would have to offer something unique to differentiate from others. So, we hired a person which is a specialist from this field and possesses a lot of valuable contacts, and we created a unique programme where we are trying to connect education with work life, create kind of a tube.” (Interviewee A)

“Our strategy was to accept more students in 2015 and 2016 so we could skip first two years with tuition fees. Instead of opening programmes in 2017 and 2018 we keep on observing other institutions and work on developing our own programme so it will be competitive enough for the fall of 2019.” (Interviewee B)

“Around the change, we tried to innovate our teaching methods. We think that we offer some special teaching techniques which can differentiate us from other universities. For example, our work placements are done during the year while students also go to school. And there are completely in Finnish.” (Interviewee C)

“We believe that we can still offer something special, what other universities cannot.

Our school lies in a small town in beautiful and calm environment by the see and still students can come here from all over the world and study bachelor´s degree in English. I think that our differentiation points are location and small size and before the change we did some innovations like adjusted the size of teaching groups and focus more on languages. And that is we hope will attract students in the future.”

(Interviewee D)

What the previous experience assumes is that legislation change strongly influences the number of applicants and changes the application base. It was assumed that the number of applicants from non-EU/EEA areas is going to decrease as it happened in Denmark as well as in Sweden (Kuronen & Mansikkamäki 2017). Based on the research conducted by Kuronen and Mansikkamäki (2017) and after the results from the trial which was kept in

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Finland between 2010 and 2014, the supposition was proven correct. According to Kallio (2017), the number of international applicants in 2017 is 10-15% lower than in 2016.

During the interviews, respondents were asked, how many applicants they had during the recent years before the tuitions were made compulsory (i.e. 2015 and 2016), compared to how many applicants they had afterwards. All principals confirmed that after the tuition fees came into practice the numbers declined and compared to the percentage from Kallio (2017) Centria recorded decline as high as 15% for the programme no.1, 28% for the programme no.2 and 20% for the programme no.3. There are no numbers for the programme no. 4 since it did not accept any students. Following chart pictures approximate numbers of applicants before and after the tuition fees were introduced, based on the data obtained via the interviews.

Table 3. Approximate number of applicants before and after the legislation change.

2015 - without the tuition fees

2016 – without the tuition fees

2017 2018

Programme No.1

No data 700 applicants Pre-intake; ^{there is}

no information concerning the number of applicants, although the programme containing around 3o students was filled with no problems

600 applicants

610 applicants 530 applicants Did not organize a programme at 2017

330 applicants (209 first round, 121 second round)

480 applicants 500 applicants Pre-intake; ^{there is}

no information concerning the number of applicants, although the programme containing around 3o students was filled with no problems

400 applicants

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No data 120 applicants Did not organize a programme at 2017

Did not organize a programme at 2018

As shown in Table 3, a decline was recorded. There were still enough applicants to fill all the programmes which consists of 10 to 23 students per class, although there were no entrance exams and the requirements of the university on the applicants were as mild as ever.

Interviewees admitted that this fact represents a threat for the future, which requires attention and solutions.

“The general decline in the number of applicants is not as severe as I personally expected, although maybe only one fourth of the applicants was actually eligible to become one of our students and we do not even have an entrance exam anymore. So, in the end, we ended up accepting almost everyone who applied. It is easier than ever to get in which is bad for school´s reputation and quality. I hope it is going to change.” (Interviewee B)

Another connected major problem emerged. Out of the number of applicants, only a fraction is actually eligible to become students. Specific requirements differ from programme to programme and are mentioned to students while applying, but the general ones are following:

applicants need to submit valid personal identification documents, provide a certificate that they have successfully completed a secondary education, they need to prove a sufficient level of English, and they need to be able to obtain a residence permit in Finland (Web.centria.com 2018).

“I don´t have an exact number, but I can say that only maybe 30% of the applications were eligible. So, in the end we did not have so many applicants to choose from.”

(Interviewee D)

The fact that the university is forced to accept majority of the eligible applicants without any further accepting requirements lowers the level of accepted groups as well as the quality of

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the school itself. This has always been as an issue, although after cancelling the entrance examinations the percentage has increased.

“When we used to have the entrance exams, from all the applicants, let´s say, 70%

was eligible to take the actual exam and potentially becoming a student. After the tuition fees came and after we canceled the entrance tests, only maybe 40% is eligible to get in.” (Interviewee A)

The principals would like to improve the overall number of applicants as well as the fact that they are forced to accept students which would not be accepted couple of years ago. Most of the programmes have already taken some actions to do so.

4.2. Innovations

As interviewees indicated, there is an urgent need for major innovations since tuition fee introduction brought a noticeable decrease in the number of applicants as well as the number of eligible applicants continues to decline. They believe that innovations and strategy modifications are going to increase the numbers of applicants as well as help to restore the level and quality of the student groups.

As mentioned in the previous chapters, when the new legislation was changed, Centria AMK decided to create a unique “pre-intake” strategy to prevent severe damages. This specific approach was very rare and besides Centria, used only by one more university in Finland – Lahti University of Applied Sciences. This strategy aimed at using the time as wisely as possible. According to the interviewees, this unique modification was one of the biggest and most successful actions, which ensure many beneficial innovations.

“During that time, we had time to think about our strategy and we decided that we are going to change the core of our programme and we are going to use it to attract students. By offering unique programme which is different from others in Finland, we believed we could win the students on our side.” (Interviewee C)

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“During that time, we decide to change our strategy a bit – we will focus now on attracting people living in Finland, who does not need to pay the tuition fees, but want to or need to study in English. And that is what we were doing in that time, we slightly changed the content (of the programme) and focused on marketing it in Finland.”

(Interviewee D)

After the legislative amendment, during the time gain by the “pre-intake”, the programme in Business Management completely redesigned its whole content and structure. One of the biggest drivers was also the fact that it is the biggest and most popular programme functioning as one of the pillars for the whole international section of the university. The principal was talking about a large period of time spent on making connections with the field leading universities in Europe as well as with foreign and local companies trying to develop a unique package for its future students. He stated following goals:

“…and we were trying to create a unique tube or a tunnel connecting the school with field´s most renowned companies, so that the students would get something special and useful at the same time.” (Interviewee C)

The uniqueness and hard work have paid off and the programme is prospering. It is even gaining attention and respect from field´s leaders and was just recently given a full article in one of the discipline`s leading journals.

Another major innovation was cancelling entrance examinations in three out of four examined programmes. In general, all international programmes are without an entrance exam except of one, and Finnish programmes are also mainly without entrance exams, only two specialized programmes still have them (Web.centria.com 2018). The school believed that ordinary written entrance tests are no longer convenient and can cause the decreased number of applicants. Instead, the selection process was based on motivational letters and motivational videos which the applicants submitted alongside with their personal documents and study certificates. The data revealed that the interviewees believe the cancellation of entrance exams can be beneficial and attract more future applicants. This change is not only an ease for the applicants but also for the university itself. A lot of money and other sources

Productization of Education

TABLE OF CONTENTS

LIST OF FIGURES AND TABLES

LIST OF ABBREVIATIONS

1. INTRODUCTION

2. LITERATURE REVIEW

3. METHODOLOGY

4. FINDINGS